Are you going to invest in a stock, property, startup, or anything else? If you are, you will most probably have a considerable amount of profit in your mind. In fact, you should as UK’s global FDI (Foreign Direct Investment) is great. According to statistics, it has almost reached a whopping GBP of 1.5 trillion. But not every investment can yield profit. Some can also lead to losses. It depends on how well you identify an asset to be good or bad.
Almost all investments you make show some signs. Signs that can tell you whether an investment is adept at yielding profit or can lead to loss. If you can determine the signs early, it is doubtful to make a bad investment. Today, we will be talking about such signs that scream, “You are making a bad investment!”
You can never be sure of whether an investment is right. But that’s the beauty of the investment game. You will always learn something. But some investments already come with red signs that need to be avoided.
1. Consult the right advisor
This is not to say that you should not listen to your advisor. But if an advisor working on a commission basis emphasizes buying a stock regularly, it can be a bad investment. One investment might yield better commission for the advisor than the other. Hence, due to human nature and bias, he might advise you to buy it.
Unlike fiduciaries, general advisors are not bound to keep your interest before theirs. Hence, it is best to consult a fiduciary financial advisor. These advisors are legally bound to keep your interests forefront and help you make a suitable investment.
2. Avoid buying hot stocks
Hot stocks are like missed buses. There’s no point in running to try to catch them. By purchasing a hot stock, you will be paying a premium amount to get them. Also, these stocks are more susceptible to bubble bursts. A simple, relatable example would be the story of Peter McCormack, who made $1 million by investing in Bitcoin but then lost the whole sum.
When it comes to property investment, you can still get some property by purchasing in a hot spot area. But if you buy a property by predicting the location’s growth rate, the profit amount will be more significant.
3. Compare the growth
If you are investing in a startup or any company, compare growth with their competitors. If you can’t do it on your own, take help from experts. But comparison will help you analyze and predict how great a profit the company can make for you.
You can check for the demand for products or services in the field and research the company’s track record and its customer service. Analyzing all these aspects will help you determine the right organization that can gain you some money.
4. Don’t look at the history of a stock
While comparing startups or enterprises is essential for a good investment, the same is not true with stocks. For instance, just because bitcoin has performed well does not mean that all the cryptocurrencies will perform similarly. In fact, even the past performance of the same stock is not a dependable factor when it comes to investment.
The market is entirely unpredictable. No one can make correct predictions all the time. Thus, whether you invest in a stock for the first time or tenth, doing your homework is necessary.
5. Avoid making complicated investments
Whether it’s stocks, property, funds, etc., understanding the investments is essential. Don’t completely rely on financial advisors. Instead, it is always better to think for yourself and give some importance to your gut feelings.
If you don’t understand the investment and merely follow your advisor, he can likely take you for a ride. If your advisor asks you to invest and you don’t understand, ask questions. Get an answer to your questions, try to figure out what the strategy looks like, and only put your money into it.
6. Skip following insider tips
You might have heard that insider tips can give you great returns on investment. But usually, these tips are sent around to boost the price of certain stocks. This is done to help someone else dump their stocks at higher rates.
At the very core, investment is all about analyzing. If you feel that your money might be lost, take it as a sign and avoid investing. Instead, save the money to invest in something better. Taking chances and investing your money will only take you towards an unprecedented future.